How Socially Responsible Investing (SRI) Works in 2021

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What does Socially Responsible Investing (SRI) mean in the year 2021?

Socially responsible investing has been a term used for investment portfolios that exclude organizations or companies based on particular exclusion criteria. Socially responsible investing might involve ethical issues, moral issues, religious beliefs, and the concept of environmental sustainability.

In 2021, socially responsible investing means avoiding investments that don’t align with the investor’s viewpoints or beliefs. Simply put, White Raven Financial believes the idea behind socially responsible investing is to align your investments with your values.

Understanding Socially Responsible Investing

Socially responsible investment is not a new idea. Some of the earliest investors in socially responsible investments were women. In fact, it is likely that female investors were among the earliest and most influential in identifying and investing in companies with sustainable business practices.

In recent years, socially responsible investing has been popular with the introduction of millennial investors, who often have a different value system from previous generations. Socially responsible investing is a way for millennials to express their values and principles. According to an article on CNBC, “about one-third of millennials often or exclusively use investments that take ESG [or SRI] factors into account.”

Socially responsible investment choices range from investments in companies that promote energy independence or sustainable agriculture to avoiding investments in opioid manufacturers or weapons brokers. Socially responsible investors may choose socially responsible investment options that align with their views on environmental issues, social issues, diversity, human rights, and animal welfare.

At its most basic level, socially responsible investing means limiting exposure to companies whose practices go against your moral code while maximizing exposure to those you believe are ethical. This might include avoiding investments in any company that produces alcoholic beverages, tobacco products, or weapons companies. Socially responsible investing means diversifying investments to include socially responsible investment options that align with an investor’s views on issues such as environmental responsibility, social justice, and animal rights.

Related Read: What You Need To Know About Sustainable and Responsible Investments

How to Build a Socially Responsible Investment Portfolio

Socially responsible investment portfolios will vary depending on the investor’s ethical and moral values. Socially responsible investors may choose to invest in socially responsible investment options that align with their views on environmental issues, social issues, diversity, human rights, and animal welfare.

In building a portfolio of investments for socially responsible investing, an investor will consider:

Step 1: Do I want a financial advisor or manage my own investments?

Creating your first SRI investment portfolio can either be accomplished by learning the market and working on your investment accounts as an individual or by hiring an experienced financial advisor with experience in SRI.

Step 2: Open a brokerage account

If you’ve decided to do your investments yourself, this means opening an investment account with a broker. Your investment account will allow you to purchase stocks, bonds, options, and/or mutual funds. When choosing an online platform for your socially responsible investment portfolio, it’s important to consider factors such as transaction fees, minimum deposits required for account openings, fee structures on individual transactions, and the types of investments offered by the brokerage firm you’ve chosen.

Step 3: Create rules around socially responsible investing

Before you start investing in SRI portfolios, you’ll want to define what issues are important to you so that you can choose specific Socially Responsible Investment options. For example, let’s say one of your moral values is caring about animal welfare. One way to invest responsibly would be by purchasing shares of companies that promote humane treatment of animals. If one of your values is social justice, you might invest in companies that promote diversity or other democratic principles.

Step 4: Research SRI choices

Once you’ve defined your values and established rules for socially responsible investments, you can begin to research companies that fit within these guidelines. For example, if one of your values is environmental responsibility, then SRI means investing in green technologies or sustainable agriculture. Another value may be promotion of democratic principles, which means investing in companies that promote human rights for women and minorities.

To find the best socially responsible investment options for your portfolio, there are many websites available that offer research on companies’ practices. Sites such as Ethos Impact, SocialFunds, and Morningstar allow investors to sort through their database of over 100,000 mutual funds to find Socially Responsible Investment products.

Step 5: Start investing (or skip Steps 2-4 and hire a financial advisor)

If you’ve decided to work with a financial advisor, your job now is just to meet with your advisor and review the recommendations. If you’re doing the investing yourself, then you’ll want to identify socially responsible investment options that fit within your investment portfolio rules.

Once you’ve found an appropriate socially responsible investment option for your portfolio, it may be time to invest! Consider going through all of the steps including opening a brokerage account and purchasing shares in a timely manner because timing can be crucial when investing for socially responsible purposes.

It may sound complicated at first, but social responsibility is about having control over who we give our money to, and it’s one of the ways to make sure your investments are in line with your values.

When Should You Consider Hiring a Socially Responsible Financial Advisor?

Socially responsible investing is just one consideration for investors among many factors that can affect their portfolios. If you are thinking about socially responsible investing, it might make sense to consult with a financial advisor to get help prioritizing your goals and choosing the best option.

In our opinion there is no perfect time to hire a socially responsible financial advisor. Whatever stage you’re at in your life, it’s important to think about what matters most to you. We see that many investors who are first starting out find that socially responsible investing works best for them once they’ve built up a decent amount of money to work with. The more money there is available, the easier it is to diversify your investments so that each one reflects your values.

Whether or not you decide to pursue responsible investing, we believe having an investment strategy is vital for maximizing savings and making sure your priorities are being met. If you lack an investment strategy, it may be time to consult with a financial advisor who can help advise on how best to meet all of your financial goals.

Schedule a Consultation Today with White Raven Financial

White Raven Financial provides a wealth of knowledge and expertise that you may need to be successful. Whether you’re new to investing or want to make a difference with your money, White Raven Financial can help you create a bespoke solution!

We live our values. Our Washington State branch is located in a rural setting on the Stump Farm, which we believe allows us to practice what we preach. Visit the Stump Farm to see our worm bin, pesticide-free vegetable garden, and trees that will be planted for future generations. We are happy to meet in person, over the phone, and also via video conferencing.

Schedule a consultation with a socially responsible financial advisor today.

Austin Hunt

Meet the Author:
Austin Hunt

Austin Hunt is the "digital face" of White Raven Financial. With over 6 years of expereince promoting positive and refreshing experiences online, Austin seeks to help individuals get the help they need. Austin enjoys writing for his blog, dancing west coast swing, and, as always, spending way too much money on a good cup of coffee.

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